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NZ dollar falls as US political stalemate erodes investor appetite for risk

Thursday 10th October 2013

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The New Zealand dollar fell in local trading as the protracted stalemate between US legislators to prevent a debt default keeps investors nervous, and unwilling to back higher-yielding, or riskier, assets.

The kiwi fell to 82.54 US cents at 5pm in Wellington from 83.02 cents at 8am and 82.95 cents yesterday. The trade-weighted index edged down to 76.79 from 76.87 yesterday.

The yield on US 10-year Treasuries rose 2.6924 percent at 5pm in Wellington from 2.6430 percent yesterday as investors mull whether or not the US House of Representatives will reach a deal on the Federal budget and raise the debt ceiling, which will be breached next week. If the US can't raise the debt limit, the world's biggest economy will default on its sovereign debt, sending markets into turmoil.

"I think they'll resolve it one way or another, like they have before," said Stuart Ive, a senior client adviser at OM Financial in Wellington. "We're certainly seeing risk off - kiwi support doesn't kick in until 82 (US cents), and it could remain under pressure until we see some form of resolution in the States."

Markets largely ignored the nomination of Janet Yellen as the next chair of the Federal Reserve. Her appointment still has to be ratified by the US Senate, though it is expected to pass the Democrat-controlled upper house.

A BNZ-BusinessNZ survey today showed local manufacturing grew at a slower pace in September as the post-quake Canterbury rebuild lost some steam, and amid tepid hiring.

The kiwi dollar fell to 87.71 Australian cents from 87.85 cents yesterday after government figures showed Australia added 9,000 jobs last month, fewer than the 15,000 anticipated in a Bloomberg survey of economists.

The local currency was little changed at 80.68 yen from 80.66 yen yesterday, and traded at 61.17 euro cents from 61.08 cents. It increased to 51.81 British pence from 51.57 pence yesterday.

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